Gaming the Next Gold Correction


"The fractal voodoo says a correction is due by month's end."

Gold has had a good, which begs the question: "When's the next correction; should I try to sell and buy back around it?" If you believe in the fractal voodoo, a 1-month correction is due to start around month's end—the type after a 64-day cycle—like that which occurred in July 2010. So why not dance around it?

If you'd done so for the last two corrections, this is how you would have. . .


That would've put you 7.7% and 5.5% ahead of a continuous hold. But when you apply this to individual gold stocks. . .

small stocks

Rather than you gaming the corrections, Mister Market games you. And that's if you had timed both corrections to near perfection. This doesn't happen with every stock, but it's very typical with small stocks. Small miners move their stocks more by their individual property stories than short-term fluctuations in the gold price. It's much more important if a property is making good strides to future production than if gold goes $100 higher or lower.

The big miners see their stocks move much more in unison with gold and silver prices. Trying to game corrections makes much more sense with them. With smaller miners, it's more a roll of the dice during a gold pullback—not to mention, commissions for small juniors are typically higher.

As for portfolio management strategies for gold corrections, it makes sense to raise some cash with gold and silver bullion ETFs and the large miners if you're attempting to trade the correction, as opposed to indiscriminate selling of all things gold. When you are holding a quality junior miner, you are holding a development story that often jumps the stock price, independent of what gold is doing, at the most inconvenient times for traders.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe